Equity Media Holdings Corp., the Little Rock-Ark.-based TV station group and owner of the upstart Retro Television Network, is in financial hot water, according to its annual report released Monday and amended yesterday.

“The company's existing capital resources are not sufficient to fund operations,” the report says.

“If the company is unable to obtain adequate additional sources of capital in the near term it will need to cease all or a portion of its operations, seek protection under U.S. bankruptcy laws and regulations, engage in a restructuring or undertake a combination of these and other actions.”

The report sent the stock price into a dive, from around $2 on Monday to a close of 85 cents yesterday, a 57.5 percent decrease.

The stock's 52-week high of $5.20 came in April 2007 when the company was formed through the merger of Equity Broadcasting and the Coconut Palm Acquisition Corp., a blank-check company that had raised $64 million in an IPO with the intent of acquiring an operating company.

Equity Media has amassed a collection of 120 full-power and low-power TV stations, most in small markets.

Equity claims to be the second-largest affiliate group of the top-ranked Univision and Telefutura Spanish-language networks with 19 affiliates (16 Univision and three Telefutura), 13 of which are in the nation's Top 65 Hispanic television markets.

The company also operates five My Network Television affiliates, four Fox affiliates and one ABC affiliate.

But what has kept Equity in the news is Retro Television Network, a 24-hour network comprising mostly classic TV shows that is intended for broadcast on secondary digital channels.

Over the past several months, Equity has announced a series of affiliation agreements with TV stations belonging to Cox Television, Allbritton, Barrington, Capitol, Media General and Scripps.

Just this week, it announced an agreement with Citadel Communications to launch RTN on all three of Citadel's stations in Des Moines-Ames, Iowa; Lincoln, Neb.; and Davenport-Iowa-Rock Island-Moline, Ill.

There have been earlier hints of Equity's troubles. Last month, the board tapped its chairman, Henry Luken, to replace Equity founder Larry Morton as president and CEO.

Morton was made chairman, president and CEO of Retro Programming Services Inc., the subsidiary that runs RTN. He remains on the Equity board.

According to the annual report, the company is in default on its credit lines. On March 20, it says, it reached an agreement with Silver Point Finance and Wells Fargo Foothill Inc. that bought some time.

The lenders, which are owned $49.9 million, have agreed “to forbear from exercising certain of their rights and remedies with respect to designated defaults” until April 18 unless the companies fails to take certain steps including the sale of assets prior to then.

“If the company is unable to meet all criteria under the forbearance agreement, the lender group will have all remedies available to them under the credit agreement, including demanding immediate payment of the obligation,” the report says.

According to the report, the company has a working capital deficit of $58.7 million and for 2007 posted a net loss of $40.8 million and experienced cash outflows from operations of approximately $30.8 million.

As of Dec. 31, 2007, the report says, the company had just $600,000 in unrestricted cash on hand.

“In the past, the Company has relied on equity and debt financing and the sale of assets to provide the necessary liquidity for the business to operate and will need to have access to substantial funds over the next 12 months in order to fund its operations.”